The One Fundamental Factor in a Loan Modification
Even though loan modifications are starting to be highly used, it's fundamental to remember that no all mortgage modifications are approved by the bank. In determining whether to approve a loan modification, the bank will generally study the key factor in the decision process: the debt-to-income ratio.
The debt-to-income ratio is the major element in determining how successful a loan modification will be because it is the best manner for the bank to figure out if the individual will pay the mortgage after the loan modification.
Prior to talking to a lender, it is a good idea for the individual to find out the debt-to-income ratio. This is so because of two major reasons.
First, the debt-to-income ratio gives the individual a good idea of whether the home loan application will be offered. Most lending institutions prefer to see a debt-to-ratio that isn't above 50%. Some lending institutions are willing to go all the way up to 55%. In a few instances, and given the adequate circumstances, some lenders will go even higher.
Second, by finding out the ratio prior to calling the lending institution, the individual could see ways in which it might change the debt-to-income if the ratio is too high even after the approval of the loan modification.
For example, frequently owners could pay off some cards in order to lower the ratio. In other cases, the individual might offer a good excuse why he will be able to make the payments even with the elevated ratio.
A lot of lenders request this ratio since banks prefer to make sure they are not wasting their resources with home owners who will stop paying the loan even after the mortgage loan modification. The ratio is a very accurate parameter of how well an individual will pay the mortgage.
As a summary, always remember that you are looking for a ratio after the loan modification that is below 50-55%. By doing the calculation before talking to a lender, the owner might be much better prepared to present the case and the chances of having the loan modification approved go up dramatically.
The debt-to-income ratio is the major element in determining how successful a loan modification will be because it is the best manner for the bank to figure out if the individual will pay the mortgage after the loan modification.
Prior to talking to a lender, it is a good idea for the individual to find out the debt-to-income ratio. This is so because of two major reasons.
First, the debt-to-income ratio gives the individual a good idea of whether the home loan application will be offered. Most lending institutions prefer to see a debt-to-ratio that isn't above 50%. Some lending institutions are willing to go all the way up to 55%. In a few instances, and given the adequate circumstances, some lenders will go even higher.
Second, by finding out the ratio prior to calling the lending institution, the individual could see ways in which it might change the debt-to-income if the ratio is too high even after the approval of the loan modification.
For example, frequently owners could pay off some cards in order to lower the ratio. In other cases, the individual might offer a good excuse why he will be able to make the payments even with the elevated ratio.
A lot of lenders request this ratio since banks prefer to make sure they are not wasting their resources with home owners who will stop paying the loan even after the mortgage loan modification. The ratio is a very accurate parameter of how well an individual will pay the mortgage.
As a summary, always remember that you are looking for a ratio after the loan modification that is below 50-55%. By doing the calculation before talking to a lender, the owner might be much better prepared to present the case and the chances of having the loan modification approved go up dramatically.
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To learn how to calculate the debt-to-income ratio for a mortgage modification or to read tenths of educational articles about how a mortgage modification works, please go to our mortgage modification site.